Executive summary

The purpose of this portfolio is to document stakeholders involved in ethical

issues of companies and steps that should be implemented to resolve the issues.
Method of research included the application of theory and the stakeholders
analysis. It was founded that Nikes step into corruption and bribery was due to
their long-term association with the Brazilian national team. CSR pyramid can
help them to reduce further allegations by the U.S. government. Next, it was also
discovered that the moral qualities of Apple are proven to be lacking of ethical
structure due to the consequences that have occurred which are related to poor
working conditions. As recommendations, both companies need to adhere to the
FCPA as well as the ILO as guidelines for better futures for their stakeholders.

Table of Content

1.0Introduction
4
2.0Ethical issue 1 (Nike)

4
2.1Stakeholder
analysis
.4
3.0Application of Carrolls CSR
pyramid4
4.0Regulatory
initiatives
..5
4.1Foreign Corrupt Practices Act (FCPA)
5
4.2Organization for Economic Cooperation and Developments
Convention.5
5.0Conclusion
5
6.0References
..6
7.0Appendix
..7
8.0Ethical Issue (Apple)
.
9
8.1Stakeholder
analysis
.9
9.0Application of Consequentialism
theory..9
10.0 Regulatory
initiatives
10
3

10.1International Labour Organization (ILO)

10
11.0
References
11
12.0 Appendix

12

1.0

Introduction
Nowadays, leaders are struggling with issues concerning ethics and
social responsibility due to the burden placed by the public, law, government
and investors. Ethics is means code abd values that administrate behaviour of
individuals, organizations and political bodies about dos and donts (Cauvusgil,
Knight, & Riesenberger, 2014).

2.0

Ethical issue
Corruption comprise of bribery, theft and extortion, which decreases
reliability and chances of success. It is simply a greater form of unethical
behaviour that personnel engage in to achieve self-gain (Ray, n.d.).
Unfortunately, Nike was alleged of sponsoring the Brazilian national soccer
federation (CBF) involving questionable payment and bribe receipts (Heitner,
2015). It was believed to serve the purpose of handing the Brazilian team over
to Nike.

2.1 Stakeholder analysis

stakeholders
Brazilian national soccer
federation (CBF)

What the stakeholder

mean to the company
Brazilian soccer team
that gets supplied with
sports equipment by
4

What the company

mean to the stakeholder
Co-sponsor or buyer of
the team

FIFA
Nike Director

Department of Justice

Nike.
Produces income from
Nikes sponsorship.
Ensures ethical and just
management of Nikes
business transactions.
Ensures the company
stays within legal
boundaries.

Opens up opportunity to
markets.
Source of income and
place of leadership.
Benchmark as to the
extent of ethical actions.

3.0 Application of Carrolls CSR pyramid

Source: Carroll (1983)

The first reason for Nike to take economic responsibilities is because
they were thought to have signed a deal for organizing several international
tournaments in 1999, thus revealing CBFs apparent interest in compensation
rather than the team (Heitner, 2015). Nike could have made a better deal to
increase their outlook when faced with an agreement deemed to failure.
Nike should have taken the step against bribery by complying with
the Foreign Corrupt Practices Act (FCPA) which is an act that forbid US
organizations from making unlawful payments, or government contribution to
foreign parties to affect business transaction (justice.gov, 2015).
Next, Nike needs to be ethically responsible. They must do the
things that are just and fair by considering other stakeholders such as the
Brazilian Football Team themselves. Before making profit as CBF intended to,
agreements need to be transparent and ethical at all cost just as the
managing director of Nike says about playing fair and are against any bribery.
For example, of Nikes unethical behaviour was that they paid a certain
amount of money to Umbro to stop their remaining years of contract so that
Nike can replace them.
To achieve discretionary responsibility, Nike needs to show the
world their transparent leadership in solving sustainability issues. They truly
believe that sustainability is the main contributor to success in business (Nike,
5

n.d.). The Brazilian soccer players needs must be looked upon since base on
the case, Nike or CBF did not weight their rights.
4.0Regulatory initiatives
4.1 foreign Corrupt Practices Act
Anti-bribery provision is aimed at stopping MNC to contribute to foreign
organizations and to increase US companies reputation in the eye of foreigners.
However, until today, grease payments are still universal among companies. For
example, Walmart Mexico was suspected of paying bribes to officials in order to
gain permit to operate new stores and wrongdoings have been kept secret by the
executives and workers (Jopson, 2012).
4.2 Organization for Economic Co-operation and Developments
Convention on Bribery
Signed by 36 countries, this convention illegalized briberies with foreign
officials in international exchanges and established dogma and procedure
enforcement. In 2010, signatories included 38 countries including non-members
such as Argentina, Brazil and South Africa which 12 indictments of persons and
organizations under the FCPA (justice.gov, 2015). According to Saltmarsh (2010),
77 entities and 148 people were authorized under criminal proceedings for
involving in foreign bribes in the countries that they operated in, hence recording
the highest number in the US.
5.0 Conclusion
Even though CBF has had a long-term association with Nike, the Justice
found that the suspected scheme was based on 24-year scheme as per named
defendants whose schemes were to enhance themselves via corruption in the
world of international soccer. For Nike to redeem themselves, they are required
to take CSR into deeper consideration by starting from taking economic
responsibilities all the way up to discretionary responsibilities. To stay within
legal boundaries, they need to comply with authorities to eliminate form of
suspicion. Hence, FCPA and OECD ensures to monitor US company such as Nike
to get involved in suspicious activity.
References
Carroll, A. B. 1983. Corporate social responsibility: Will industry respond to cutbacks in social program funding? Vital Speeches of the Day, vol. 49, pp. 604608.
Cavusgil, S. T., Knight, G., & Riesenberg, J. R. 2014. International Business: The
New Realities. United States of America: Pearson.
Heitner, D. May 2015. Nike implicated in soccer bribery scheme. Forbes
Business. Online. Available at:
http://www.forbes.com/sites/darrenheitner/2015/05/27/major-u-s-sportswearcompany-implicated-in-soccer-bribery-scheme/
6

Jopson, B., April 2012. Mexico opens investigation to Walmart stores permits.
Financial Times. London UK.
Justice.gov, 2015. Foreign corrupt practices act FCPA. The United States
Department of Justice. Online. Available at: http://www.justice.gov/criminalfraud/foreign-corrupt-practices-act
Nike, n.d. Sustainable innovations. Sustainability. Online. Available at:
http://about.nike.com/pages/sustainability
Ray, L. n.d. The effects of corruption on business. Chron Small Business. Online.
Available at: http://smallbusiness.chron.com/effects-corruption-business52808.html
Saltmarsh, M. 2010.US sees improved cooperation on fighting corruption.
www.nytimes

Appendix
Nike Implicated In Soccer Bribery Scheme
Darren Heitner
CONTRIBUTOR
I cover the intersection of sports and money.

From the beginning of this century through today, the CBF has been
associated with Nike, a U.S. sportswear company

It appears as if Nike is suspected by U.S. authorities of connection to bribery involving the

sponsorship of the Brazilian national soccer federation (CBF). The U.S. Department of
Justice today announced the indictment of nine Fdration Internationale de Football
Association (FIFA) officials and five businessmen for racketeering conspiracy and
corruption. The DOJs statement says that the crimes alleged include the payment and
receipt of bribes and kickbacks in connection with the sponsorship of CBF by a
major U.S. sportswear company. A statement released later in the day by Nike appeared to
confirm that it is the company under the microscope.
Nike believes in ethical and fair play in both business and sport and strongly opposes any
form of manipulation or bribery, the statement said. We have been cooperating, and will
continue to cooperate, with the authorities.
In 1996, U.S. sportswear juggernaut Nike signed a roughly $200 million contract with the
CBF, which gave the company the rights to supply sports kits and be a co-sponsor of the
Brazilian national team. Details concerning the terms of the deal began to leak in 1999. The
following is a snippet from a July 2001 article in The Guardian:
A clause stipulated Nikes right to organise five international games a year with
at least eight first team regulars. Juca Kfouri, Brazils leading sports columnist,
said: It is obvious to me that the CBF gave away sovereignty. The CBF is more
interested in remuneration than the interests of the Brazilian national team.
ForbesBrandVoice
?
Aldo Rebelo, a communist congressman in Brazil, was quoted in that same article stating
that Disney didnt sell Mickey Mouse, but the CBF sold the national team to
Nike. He added, The Nike contract was just a sign. It was the most visible way
of showing what was going on in Brazilian football.
Prior to Nike, the CBF was under contract with Umbro. In fact, Nike paid Umbro an
undisclosed amount of money in order to void the final two years on its contract with the
CBF. Nike wanted to control the world of soccer and the focal point was taking over
sponsorship of the Brazilian national soccer federation.
In 2008, Nike signed a new agreement with the CBF, which extended the previously
negotiated deal through 2018. The deal provides CBF with an annual payment of $34
million from Nike.
From the beginning of this century through today, the CBF has been associated
with Nike, a U.S. sportswear company . The U.S. Department of Justice release states
that its findings are based on an alleged 24-year scheme based on the named defendants
scheme to enrich themselves through the corruption of international soccer.
8

I reached out to a Director at Nike who provided no comment when this article was originally
published.
Update: At 2:30 p.m. ET Nike released the following statement Like fans everywhere we
care passionately about the game and are concerned by the very serious allegations. Nike
believes in ethical and fair play in both business and sport and strongly opposes any form of
manipulation or bribery. We have been cooperating, and will continue to cooperate, with the
authorities.

8.0

Ethical Issue
The second ethical issue highlighted in the second article was about
Apples inability to protect and provide for their Chinese workers, hence
causing cases of suicide to occur. Other than the fact that Apple outsourced
to Foxcon in China for a cheaper alternative, they are already taking away
thousands of job opportunities for Americans (Schuman, 2011). Following up
with this dilemma that began in 2010, seems like things did not get better in
2014 for Apple. According to Cavusgil, Knight, & Riesenberger (2014). Ethical
dilemma is defined as a quandary with major struggles among different

interests in which determines the most adequate action is perplexed by a

number of solutions.
8.1

Stakeholder analysis

stakeholders

What the stakeholder

mean to the company

Chinese workers

Source of energy or
workforce for the
production and
assembling of Apple
products.
Cheaper alternative of
under aged workforce to
extract minerals and
perform other
unethically dangerous
tasks.

Child labour in Indonesia

Apple manager (Chinese

factory)
Panorama reporters

9.0

Leadership representing
the company in a foreign
country.
Channel of media
presence.

What the company

mean to the
stakeholder
Main source of income,
shelter (dormitories) and
food.

Source of income even

though the pay is very
low and working
conditions are poor. But
if the children stop
working their income
source is cut and the
poor becomes poorer.
Source of income and
place of management
leadership.
Information basis for
research and ethical
decision making to be
published.

Application of Ethical theory of Consequentialism

This theory explains that everything that people might do at any period
of time, the ethically appropriate action to take should be the one with the
best consequences, which means that individuals must perform what produces
the most good.
Apples failure to protect its workers can be attributed to direct
consequentialism. This is described as the moral characteristics of something
only depends on the effect of that very thing (Stanford Encyclopedia, 2014).
The direct consequentialist of Apples intentions carry moral qualities of their
intention depending on the impact of their intentions. For instance, their
motive of providing dormitories for their workers proves their low moral quality
due to consequence of overcrowding, hunger, fatigue and suicide. In line with
this, the direct consequentialist based on virtues carry the moral qualities of a
trait in accordance the effects by that trait (Bradley, 2005). It can be said that
Apples intention revealed the true quality of their ethics.
In order for Apple to deal with this is perhaps by using rule
consequentialism which is an indirect consequentialism. It is based on moral
rules of their effects, which removes most of act consequentialisms problems.
Basically, it clarifies on whether behaviours are either good or bad depending
10

on the moral rules as well as moral rules function as whole based on the
impact (BBC, 2014). Setting for a better future for Apples workers, seeing the
consequences that have occurred should encourage them to investigate an
appropriate rule to apply. For instance, since many miners in Indonesia sells
tin through middle men, Apple decided to get engaged and in the fields using
child labour to search tin (Bilton, 2014). With proper ethical compliance of a
set of rules, Apples efforts should result in the most good for most of
stakeholders. However, in some situations, a rule is considered to only be
accepted if it is internalised (Brandt, 1979). Saving individuals from harsh
conditions wont only do them the favour, but also do the company a favour.
10.0 Regulatory initiatives
10.1 International Labour Organization (ILO)
The purpose of this organization is to give an equal opportunity for
employees, worker and government to voice out their concerns in order to
make sure that the social partner perspectives are closely mirrored in
labour standards and in forming policies and programs.
Under the ILO, it is highly recommended that Apple complies with the
principle of the effective abolition of child labour that its goal is to prevent
all work by youngsters that interrupts with their development and
education. This however doesnt stop the children from working, it is
somehow underlined with distinctions that are made between what is
considered acceptable and what is not (ilo.org, n.d.). For example, Apple
can still allow the children in Indonesia to work for their company, but
depending on the form of the work, their age, intensity and hours. Since
the poverty rate is quiet high in that country, parents are bound to
encourage their children to work in order to provide income for the family.
In conclusion, ethical sourcing is a definite desirable aim for major
companies that are accomplishing success and public acceptance.

11

References
BBC, 2014. About consequentialism. BBC. Online. Available at:
http://www.bbc.co.uk/ethics/introduction/consequentialism_1.shtml
Bilton, R. December 2014. Apple failing to protect Chinese factory workers.
BBC News. Online. Available at http://www.bbc.com/news/business-30532463
Brandt, R., 1979. A Theory of the Good and the Right, New York: Oxford
University Press.
Cavusgil, S. T., Knight, G., & Riesenberg, J. R. 2014. International Business: The
New Realities. United States of America: Pearson.
Ilo.org, n.d. International Labour Organization (ILO). Online. Available at:
http://www.ilo.org/declaration/principles/eliminationofchildlabour/lang-en/index.htm
Schuman, M., May 2011. Adding up the iphone: How an American Invention
makes money for the world. Time.
Stanford Encyclopedia, 2014. Consequentialism. Stanford Encyclopedia of
Philosophy. Online. Available at:
http://plato.stanford.edu/entries/consequentialism/#ConWhaRigRelRul

12

Appendix
Apple 'failing to protect Chinese factory workers'
By Richard BiltonBBC Panorama

18 December 2014

Poor treatment of workers in Chinese factories which make Apple products

has been discovered by an undercover BBC Panorama investigation.
Filming on an iPhone 6 production line showed Apple's promises to protect workers
were routinely broken.
It found standards on workers' hours, ID cards, dormitories, work meetings and
juvenile workers were being breached at the Pegatron factories.
Apple said it strongly disagreed with the programme's conclusions.
Exhausted workers were filmed falling asleep on their 12-hour shifts at the Pegatron
factories on the outskirts of Shanghai.
One undercover reporter, working in a factory making parts for Apple computers,
had to work 18 days in a row despite repeated requests for a day off.
Another reporter, whose longest shift was 16 hours, said: "Every time I got back to
the dormitories, I wouldn't want to move.
"Even if I was hungry I wouldn't want to get up to eat. I just wanted to lie down and
rest. I was unable to sleep at night because of the stress."

'Continuous improvement'
Apple declined to be interviewed for the programme, but said in a statement: "We
are aware of no other company doing as much as Apple to ensure fair and safe
working conditions.
"We work with suppliers to address shortfalls, and we see continuous and significant
improvement, but we know our work is never done."
Apple said it was a very common practice for workers to nap during breaks, but it
would investigate any evidence they were falling asleep while working.
It said it monitored the working hours of more than a million workers and that staff at
Pegatron were averaging 55 hours a week.

13

The poor conditions in Chinese factories were highlighted in 2010 when 14 workers
killed themselves at Apple's biggest supplier, Foxconn.
Following the suicides, Apple published a set of standards spelling out how factory
workers should be treated. It also moved some of its production work to Pegatron's
factories on the outskirts of Shanghai.
But Panorama's undercover reporters found that these standards were routinely
breached on the factory floor.
Overtime is supposed to be voluntary, but none of the reporters were offered any
choice. In addition to the excessive hours, one reporter had to attend unpaid
meetings before and after work. Another reporter was housed in a dormitory where
12 workers shared a cramped room.
Apple says the dormitory overcrowding has now been resolved and that it requires
suppliers to retroactively pay workers if it finds they haven't been paid for work
meetings.
Pegatron said it was carefully investigating Panorama's claims and would take all
necessary action if any deficiencies were found at their facilities.
"Worker safety and well-being are our top priorities. We set very high standards,
conduct rigorous training for managers and workers, and have external auditors
regularly visiting our facilities to find areas for improvement," a statement said.

Dangerous conditions
Panorama also travelled further down Apple's supply chain to the Indonesian island
of Bangka.
Apple says it is dedicated to the ethical sourcing of minerals, but the programme
found evidence that tin from illegal mines could be entering its supply chain.
It found children digging tin ore out by hand in extremely dangerous conditions miners can be buried alive when the walls of sand or mud collapse.

14

Rainto, 12, said he

was worried about landslides

Twelve-year-old Rianto was working with his dad at the bottom of a 70-foot cliff of
sand. He said: "I worry about landslides. The earth slipping from up there to the
bottom. It could happen."
Panorama tracked down a gang who collect tin from the area where Rianto was
working. One of them said they sold tin to a smelter on Apple's list of suppliers.
Johan Murod, who runs one of the smelters on Apple's list, said 70% of the tin that is
exported comes from the small-scale mines.
"At the smelter there's everything from both large and small scale mines. It's all
mixed. There's no way to know what is legal and what is illegal."
Apple says it is a complex situation on Bangka with tens of thousands of miners
selling tin through many middle men.
"The simplest course of action would be for Apple to unilaterally refuse any tin from
Indonesian mines. That would be easy for us to do and would certainly shield us from
criticism.
"But that would also be the lazy and cowardly path, since it would do nothing to
improve the situation. We have chosen to stay engaged and attempt to drive
changes on the ground."

15